In the world of eCommerce, customer returns are like dirty dishes at the end of a dinner party. Despite all the work and planning that went into setting the table, choosing the wine, and making a delicious meal, hosts usually give zero thought to the cleanup.
The result? They wake up the next morning with an empty house, a headache, and a disaster area waiting in the kitchen.
While this might be manageable for the occasional soiree, the lack of a well-planned, efficient system for handling online returns is ruinous in a business environment where the eCommerce return rate hovers somewhere around 20% of customer orders.
Simply put, product returns are a fact of life for all eCommerce businesses. And, while some sectors (apparel, auto parts) might have dramatically higher rates of return than others (pharmaceuticals, skin care), the bottom line is that the returns process is both a critical element of customer service as well as the final stage of order fulfillment.
At SkuNexus, we design software solutions to help online retailers manage their entire backend operations. Here, we would like to present an overview of the returns process and provide you with the information you need to optimize performance in this area.
How to Handle Returns for Your Online Store
Just as no two online stores are the same, neither are their approaches to returned items. How they manage returns can have an outsized impact on their aggregate customer experience, however.
In a world dominated by social media and the risk of negative online reviews, the return process must be as easy and frictionless as possible. Before we discuss the nitty gritty of reverse logistics, let’s consider the options a merchant has regarding how to handle and deal with returned items.
The simplest method is the one most in line with customer expectations - a brand clearly states, in writing, that it will accept returns for any reason, issues a refund, and pays the shipping cost for the returned item(s).
Admittedly, this model puts the online retailer at a significant financial and logistical disadvantage. Merchants are well within their rights to take steps to mitigate their losses, but it can be a tricky area to navigate - a fine line exists between what customers might consider reasonable and what they deem punitive.
Perhaps the best way to approach it is to view every return request as an opportunity for positive engagement. Recognition of the issue, reassuring the customer, and offering guidance on the next steps (and other items) can go a long way toward turning a negative situation into a positive one.
Tips on Managing the Return of a Product
The eCommerce upheaval has dramatically altered everything that was formerly known as the retail shopping experience. And, while things have never been easier for customers, it can be argued that the opposite holds true for merchants in many sectors of their businesses.
Shoppers will interact with a brand wherever they spend time online. They will ask questions about your gift cards on Instagram. They will inquire about a restocking fee on Amazon. They will engage in live chat at your online store. In all of these instances, they will expect prompt, efficient resolution.
The same goes for returns. Shoppers now demand the return experience to be simple, quick, painless, and at their convenience. As a result, brands have had to completely rethink everything that goes into the returns process.
Consider How/Where Shoppers Want to Return Items
How and where shoppers prefer to make their returns is generally at the intersection of geography and convenience. Large metropolitan areas with both urban and suburban areas provide a range of options: branded shipping courier stores (UPS, FedEX Kinkos), dropoff lockers (Amazon, UPS), and the large retailers’ physical locations themselves. Small towns may lack the range of offerings, but, as in big cities, nearly every rural area has a post office.
Streamline the Process for the Customer
Regardless of whether a customer returning purchased products has a dropoff locker in the lobby of their hi-rise building or needs to drive to a regional post office, they should receive return labels within the original packaging. The ability to use the same parcel to return the items with free return shipping has become a de facto eCommerce standard.
Considering how popular a shopping option BOPIS (Buy Online Pickup In Store) has become, it should come as no surprise that more stores now offer BORIS (Buy Online Return In Store) as well. This not only gives customers more choices, but also presents an enormous opportunity to online retailers who have physical locations. The ability to get shoppers into the store can pay dividends with additional sales and face-to-face marketing initiatives.
Be Flexible
Clearly-defined return policies should establish things like return deadlines and whether a merchant will issue a refund or exchange the item for something else, transmit a store credit, etc. However, flexibility and discretion are also hugely appealing to customers. Things happen, people miss deadlines, everyone makes mistakes, etc. Publishing rules and guidelines for returns is necessary, however no brand is ever loved by customers for its steadfast rigidity.
What is the Total Cost of Returns for Online Retailers
Online retailers are in the trenches dealing with supply chain problems, communication breakdowns, and countless other issues. Every issue comes with a cost and the return rate has become one that no merchant can ignore.
Even with the attention being paid, it can be easy to overlook the total cost of online returns. A number of factors are involved and each one plays a role, either directly or indirectly.
Warehouse and Equipment: Merchants must devote significant warehouse space and machinery to manage returned items.
Transportation: This does not just entail the cost of providing free return shipping to online shoppers. Businesses must also consider the secondary costs of transporting returned goods from wherever they were returned to their final location.
Labor: Many different employees will be involved in the returns process. Drivers and warehouse workers will manage the returned product (transporting, restocking). Customer service associates will be tasked with fielding questions and handling the return from the administrative side. And, in the event that items need to be recycled or disposed of altogether, further labor may be devoted to those tasks.
Damaged or Defective Products: Damaged products often cannot be cannot be resold and must be scrapped at a partial or total loss, while faulty products will result in either a refund or the cost of a replacement item.
Return Fraud: This can take a variety of forms and has dramatically increased in lockstep with the growth of eCommerce overall.
Preparation for Resale: In the best-case scenario, a returned product is in pristine condition for resale, however it often must be repackaged, rehabilitated, etc., prior to being ready.
Environmental: Oft-overlooked, but a critical indirect cost of returns, as an estimated 10% of all returns end up in a landfill.
How to Accept a Returned Item into Inventory
Efficiently accepting returns and returning them into the fold is a critical element of eCommerce inventory management. Manage product return processing well and it can become another cog in a well-oiled machine. Do it poorly and the effects will be felt throughout your business.
Just as an optimized warehouse is strategically organized for various processes, it must also have space (and personnel) dedicated to receiving and inspecting returned merchandise. The establishment of this area is crucial to avoid disruption of everything else going on. The same is true for brick-and-mortar stores.
Upon receipt of a returned item, it should be scanned before being inspected to assess its return category. Products must then be sorted based on a merchant’s own specifications. For example, an electronics retailer will have vastly different types of inspection and categories than a shoe store.
By scanning returned products, the control and accuracy desired for all products can be reestablished. This does not mean that they are back in inventory, but rather that they are in a staging process.
Once a product has been deemed worthy for resale, it may be scanned and returned into inventory. If the item needs to be categorized as “resale” as opposed to “new,” allowances should be made for that within the merchant’s inventory management system.
Online returns may force merchants to perform costly logistical gymnastics, but for better or worse, they are here to stay. In a field as competitive as eCommerce, any edge a brand can create is worthwhile, and optimizing returns is certainly a great place to focus. From customer service to warehouse management, taking the time to create a thoughtful returns process can only have a positive impact on your business.
SkuNexus software can help you create that edge and manage the entirety of operations for your eCommerce backend. If you are interested in reading our ongoing tips and insights, please subscribe to our blog.
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